Insurance agents and brokers had many fires to extinguish in2013. Along with long-standing challenges like competing withdirect writers, recruiting top talent and staying ahead of the techcurve, they also had to grapple with healthcare reform (as bothemployer and client advisor), carrier price and underwritingchanges, and maximizing their use of social media.

These setbacks can become opportunities for growth in 2014.Here, industry experts weigh in on these challenges and detail howagents can capitalize. Read on:

Challenge: Obamacare is confusing and tough tonavigate.

Opportunity: Educate consumers on theirchoices.

The Affordable Care Act (ACA) continues its troubled evolutionamid ongoing concerns about dropped insurance plans and thefunctionality of the ACA signup website. The latest wrinkle: aone-year postponement of online health insurance enrollment forbusinesses with fewer than 50 employees.

But agents who view the mandate with dread are missing the bigpicture, says ChrisAmrhein, insurance educator and National UnderwriterP&C “Policy Issues” columnist. “Independent agents alreadymake a good living selling crop insurance, flood and workers'compensation—all government-created insurance programs. That's notto say that the government can't totally mess up markets, but for along time the plan is to either learn to work with them or workaround them. There's nothing really new to see here, beyond thepolitics.”

Take advantage of ACA confusion and website navigationdifficulties: Many independent agents and brokers have been trainedand certified to help consumers enroll in health plans offered aspart of the ACA and can educate consumers about choices outside theexchanges.

Follow the example of Joey Giangola, principal at Giangola Insurance AgencyInc., a personal lines agency in Ashtabula, Ohio (tagline:“Insurance is boring, but what it protects isn't”), who educatesclients and prospects on healthcare and other issues with blogposts and YouTube videos.

Challenge: In personal lines auto, direct writers arestealing your lunch.

Opportunity: Insurance isn't a commodity. You are thego-to expert.

Direct writers' impact on independent agents has taken on a newlife as more consumers shop and buy insurance coverage online.Earlier this year a McKinsey study claimed the public doesn't want to buy insurancethrough independent agents. But “when you examine these 'studies,'you will often find they are not based on original research, theyare just opinion articles from consulting firms,” says TedBesesparis, senior vice president, National Association ofProfessional Insurance Agents (PIA) and NU P&Cadvisory board member.

“This most recent competitive effort to disadvantage theagency system and capture its profits will fail. Despite the wishesof our direct-writer competitors, it comes down to what customerswant: Customers want agents.”

The Big I's Consumer Agent Portal(CAP) and TrustedChoice.com apply direct-writer strategies tothe independent agency system. The Trusted Choice website, whereconsumers can find an agent and receive quotes and advice online,saw a 300% unique consumer hit increase from November to December,says Bob Rusbuldt, Big I president and CEO.

And the perfect pebble in David's slingshot is social media,which levels the playing field between independent agents anddirect writers.

Challenge: Social media demands are timeconsuming.

Opportunity: Social media is a portal to unprecedentedcustomer engagement.

Five years ago, most businesses viewed social media as kids'stuff. Today, you're dead in the water without a strong socialmedia presence. Social networking works and is easy to do, butinsurance brands are either sailing or floundering/sinking insocial media, depending on their grasp of the medium.

Customers prefer that you reach them in different ways, saysPeter van Aartrijk, CEO of insurance brand firm Aartrijk. Text, e-mail, Twitter, phoneand snail mail are all ways in which clients and prospects want toconnect. The ACT Strategic Future Issues Work Group, in a September 2013report, suggests thinking in terms of a “social culture,” whichincludes rich media such as video, the education economy, anddigital and content marketing.

Agents and brokers who are doing social media right—and thereare many examples, especially among younger agents—are not onlyseeing increased customer engagement, but an accompanying jump inprofitability.

Read related: “9Smart Solutions to 9 Brand Problems.”

Challenge: Your customers just don't understand the insand outs of insurance.

Opportunity: You can teach them—and in the process, earntheir loyalty.

More than 5,000 businesses responding to Zywave's 2013 Broker Services Survey named three essentialexpectations from their brokers: providing claims-submissionsupport, timely delivery of certificates of insurance and ID cards,and helping the organization become a more educated insurancebuyer. But 38% were dissatisfied with their brokers' performancesregarding client education.

The study also showed that policyholders want regulatory andlegislative updates, claims-reducing information, andemployee-focused health and safety information. Are you giving yourcustomers what they want?

The ongoing tightening in pricing and underwriting provides agreat teaching opportunity, says Eric Tedmus, founder and CEO ofTedmus Insurance Servicesin Walnut Creek, Calif. Although it can be challenging to justifyrate increases and explain a hardening market to his clients, “onthe flip side, if young agents can educate their clients pre- andpost-underwriting, the client will appreciate them much more andretention should rise.”

What's more, that education goes both ways: Successful agentslearn their clients' risk tolerances, says Anita Bourke, executivevice president for TheInstitutes in Malvern, Pa., and NU P&C advisoryboard member. Most clients are re-evaluating their risk managementapproaches, such as self-insured clients exploring true risktransfer programs in heavy manufacturing, pharmaceuticals and realestate investment trusts. “Find out the client's risk tolerance,and get creative with placements so clients can evaluate riskmanagement techniques they may not have otherwise considered,”Bourke says.

Challenge: Rapid advances in technology can make forquick obsolescence.

Opportunity: Smart tech investments will pay off bigtime.

In Reagan Consulting and IIABA's joint 2013 BestPractices Study, agencies with under $10 million in revenuessays they would invest in Internet marketing in 2014, while largerbrokerages will pay for systems upgrades. The top tech investmentpriorities for all firms are agency management systems, ratingsystems, carrier connectivity, web portals, Internet marketing,social media and business intelligence tools.

Staying ahead of the tech curve is essential for agentsspecializing in E&S business, says Frank Mastowski, presidentof the American Association of Managing General Agents (AAMGA) and president of Jimcor Agencies in King of Prussia,Pa. “If you want to do business in London, one of the earlyconversations with the carrier includes questions on your abilityto capture data.”

The next big wave is mobile apps. Tablet sales are expected toexceed laptop and PC sales by the end of first-quarter 2014, saysRickGilman, executive director of the Personal Lines GrowthAlliance, and NU P&C “Agency Technology” columnist.“Agents that 'get' the growing role that mobile is playing willthrive in 2014 and beyond. Those that don't will become unfindable,invisible and irrelevant to this next generation.”

Challenge: “Generalist” independentagencies will have trouble surviving.

Opportunity: With a growing E&Sfield and emerging risks, it's easier than ever tospecialize.

Agency specialization—across all revenue categories—shows nosign of slowing down. The 2013 Best Practices Study finds 39.4% ofthe smallest agencies (less than $1.25 million in revenue) had atleast one specialty or niche, as did 80% of the largest agencies(with more than $25 million in revenue).

Specialization is another way for independent agents andwholesale insurance professionals to differentiate themselves fromcommodity insurance selling, says Bernie G. Heinze, executivedirector of the AAMGA and NU P&C advisory boardmember. “The days of the general practitioner are waning,” he says.Wholesalers and MGAs must provide professional developmentopportunities for their agents so they can better sell and marketniche coverage.

Challenge: Smaller independent agencies can find ittough to survive in a competitive marketplace.

Opportunity: Smart firms are growing through M&A oraggregators.

Given the benefits of scale in property & casualty and theemployee benefits landscape overall, consolidation will continue,predicts Doug Hammond, chairman and CEO of NFP (National Financial Partners), abenefits, insurance and wealth management firm headquartered in NewYork. “It's very difficult for smaller players to have the capitaland scale to invest in the resources they need to succeed. It takesa big staff of professionals and a large tech budget to effectivelynavigate and help the client.”

Mergers and acquisitions will continue to trend, says Daniel J.Kaufman, corporate vice president and managing director at Burns& Wilcox Chicago and an NU P&C advisory boardmember. “Over the past few years, we have seen bank-owned orprivate equity-backed companies acquire competitors of all shapesand sizes; and with the widespread availability of capital, thesemoves become especially attractive,” he says.

However, Kaufman cautions against confusing exponential growthwith long-term financial stability. “The organizations thatwill succeed have proven year after year that they are profitable,have the financial freedom to invest in talent and make key,strategic acquisitions that deepen their existingcapabilities.”

More smaller agencies are joining aggregator groups such asCombined Agents of America, Keystone and SIAA, says Shirley Lukens,senior vice president of Reagan Consulting. At onetime, agents joined aggregators because they couldn't maintainmarkets but today, it's for revenue maximization for largerprofit-sharing opportunities. Mid-sized agencies join aggregatorsto share ideas and expand their professional development.

Challenge: Increased regulation of the insuranceindustry.

Opportunity: Educate legislators and regulators on thebusiness.

With continued implementation of the NRRA, the Terrorism RiskInsurance Act (TRIA)'s year-end 2014 expiration and variousCongressional proposals to renew next year, agents should beproactive to restrain state and federal regulatory intervention,says Bernie Heinze of the AAMGA.

The National Flood Insurance Program's future through theBiggert-Waters Flood Insurance Reform Act of 2012 is anotherhot-button issue. The Big I and others are working with Congress tobalance policyholder affordability with NFIP financial security,says Robert Rusbuldt, president and CEO of the IndependentInsurance Agents & Brokers of America.

“Being proactive to restrain state and federal regulatoryintervention into insurance beyond necessary consumer protectionsand incentivized market competition will require increaseddiligence in 2014,” adds Heinze.

But the success of state-based insurance regulation, especiallyduring the economic meltdown of 2007-2008, speaks for itself. Assoldiers on the front lines, independent insurance producers are ina perfect position to speak up on behalf of the industry tolegislators and regulators through lobbying.

And on a preemptive basis, Heinze says, the industry needs tokeep an eye on what's going on in the courts as well, such aschallenges to E&S freedom of rate and form in states likeFlorida, California, Illinois and New York.

Challenge: Retiring baby boomers, and the loss ofinstitutional knowledge at many agencies.

Opportunity: Mentor and hire millennials.

Hiring and retention will continue to challenge the insuranceindustry in 2014 and beyond. But many mid-sized agencies are hiringproducers under age 30 with or without an insurance background.

Industry organizations are fostering relationships with youngprofessionals. NAPSLO's Next Generation initiative continues to setthe pace in attracting and fostering young talent in thesurplus-lines industry; AAMGA aligns with 58 risk managementinsurance education programs in the U.S.; and The Institutes andthe Griffith Foundation Education Foundation sponsor target highschool and college students with its workgroup Engaging the NextGeneration.

Read related: “ExtremeMakeover: The Independent Agency Edition”

Challenge: Issues regarding cyber liability and onlineprivacy.

Opportunity: Get businesses up to speed–fast–on theirneed for cyber liability cover.

Agents and brokers must educate clients on the importance ofcoverage as a fundamental component of their risk managementportfolio, clarify the differences between first- and third-partyexposures, and help mitigate against this growing threat to theirbusiness.

Yet agents are vulnerable to breaches themselves. “We've alwaysbeen an industry that knows too much about people that no one elseshould know. But now that everything is being pushed to digital,incredible fear is taking hold of how much easier it is for someoneto crack into the vault and then we get held liable,” saysinsurance educator Chris Amrhein.

Read related: “Howto Purchase Cyber Insurance” and “3 Guidelines to Reducing DataBreach Exposure”